House Price Corrections In OECD Countries

Abstract

We study the impact of varying monetary policies across OECD countries on international house price cycles, considering credit growth, overvaluation, and monetary policy as factors. We construct a cross-country measure of monetary policy expectations and estimate house price overvaluation via an asset pricing model. Our panel logit regression model estimates the likelihood of house price corrections. We find that our housing overvaluation model and credit growth display consistent results as predictors for house price corrections, both in the short term and in longer terms. While the expectation component only works as a predictor under certain conditions.